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Revenue
Revenue With the advent of the Internet, particular business models are needed in order to reshape previous ways of creating revenue for a business. Rappa (2009) explains that a business model is the method of doing business, by which a company can sustain itself – that is generating revenue. In simple terms, by what way does a company earn money? There are several categories of business models, however MySpace falls into four categories. These are Community, Brokerage, Affiliate and Advertising. 'Community' The community model relies on loyal users of a site. These are users who have invested both time and emotion to the site. Revenue is generated, by offering products and services through sales on the site or through contextual advertising. The Internet is well suited for this model and today; it is one of the best revenue models in the world. MySpace falls within a single category in the model: · Social Networking Services– A social networking site are sites that offers individuals with the ability to connect to other individuals, whether it’d be by interest or by real life connection. Social networking services can provide opportunities for contextual advertising and subscriptions for premium services (Rappa, 2009). MySpace in Community model: MySpace’s advertising revenue depends on a high amount of traffic. As it is a social networking site, MySpace was able to do this mainly, by offering individuals with the ability to connect to other individuals, whether it is by interest or by real life connection. This in turns, allows MySpace to have a high amount of traffic for their advertising and affiliate models. 'Brokerage' Brokers bring buyers and sellers together and facilitate transactions (Rappa, 2009). They charge a fee every time a transaction is enabled. They play a frequent role in markets such as business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C) markets. (Rappa, 2009). There are several models, but MySpace fits more within these two models: -Transaction Broker: provides a third-party payment way for buyers and sellers to settle a transaction (Rappa, 2009). -Distributor: catalogue operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners (Rappa, 2009). MySpace in Brokerage model: ' MySpace’s main point as a website is to cater for music fans – from creators to buyers. In 2006, MySpace had 3 million unsigned bands, of which the company decided to sell songs from those bands (Cashmore, 2006). This is done through SnoCap, the external music distribution software. As of 2008, MySpace had partnered with three major records, acting as a third party between music lovers and music creators (Buskirk, 2008). 'Affiliate The affiliate model provides affiliated partner sites with financial incentives: using a percentage of the revenue, they offer an opportunity where customers will buy products whenever they are online on a certain site. Businesses accomplished this by leading the user to click links that would transfer them to the advertisement. However, this model is a pay-for-performance model. It depends on the generated sales of the item. This model is considered one of the best models for an Internet business model. (Rappa, 2009) MySpace’s revenue model of this can be categorised into two: - Banner Exchange: A network of affiliated sites trades advertisements and banner with another site, in the hope to generate traffic and customer (Rappa, 2009). - Revenue Sharing: A site offers a percent-of-sale commission based on the amount of user-click generated and the user is expected to purchase a product (Rappa, 2009). MySpace in Affiliate model: ' Google paid MySpace $900m in 2006 to provide search and advertising on MySpace. Using Google’s AdSense network, the adverts work by using keywords as a trigger. When an advertisement is clicked, the user is transferred to an affiliate site or to the site that originally placed the advertisement. (Google signs $900m News Corp deal, 2006). 'Advertising The web-advertising model adds itself to the traditional media broadcast model. The web media companies using this model do the same thing, except through websites. Their website provides content and services mixed with advertising messages. This is generally done through the form of banner ads (Rappa, 2009). Therefore, the model relies on large or high amount of traffic (Rappa, 2009). There are two types of the model that applies to MySpace: -Contextual Advertising / Behavioral Marketing: These are freeware developers who include advertising software with their product. This software delivers advertising links or pop-ups while the user surfs the web. It can also record an individual’s activity on the website and generate selected advertising (Rappa, 2009). -Content-Targeted Advertising: Similar as the above, this advertising model targets specific audience. Created by Google, this model identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page (Rappa, 2009). MySpace in Advertising: As said before, MySpace affiliates with Google in 2006. They use Google’s Behavioural Marketing system from AdSense to sell only advertisements that their users want to see. As of 2009, MySpace had 64 million users, with predicted revenue of $490 million from advertising alone (Quenqua, 2009). 'Economy' In order for an Internet business to be successful, the service providers must know their target market. Reaching out to a broad market with no specific or measurable goals is unrealistic and unachievable as it is impossible to target everyone. Defining your market through demographics, geographic locations and online behaviours makes it easier to satisfy your markets needs. Through the case study of Myspace, the following are a few of the aspects needed for a successful Internet business. One of the main reasons Facebook succeeded as a broad social network was because they kept “adding, adding and adding, doing whatever to allow the market place to flourish” (Maurer, 1999, p.19), because “in a network economy, value is derived from plentitude” (Kelly, 1997).''' '''Unfortunately Myspace didn’t follow this, they didn’t adapt to their users as Newscorp tried to professionally manage Myspace – while mistakenly, disregarding their target market. As a result, Myspace gave up on its social media leadership dreams and narrowed its focus to the niche of being a “social entertainment destination” (McEleny, 2010, p.8). As previously mentioned, it is vital to know your market. By segmenting your target market, advertising campaigns tend to be more creative and effective. As Myspace rebranded itself, they focused on the young and tech savvy music lovers, which therefore “clarified its brand” (McEleny, 2010, p.8). Following the Long Tail concept, Myspace finally targeted their niche audience, giving the opportunity for independent brands to be found, making all music available and free, “Free has a cost: the psychological value of convenience” (Anderson, 2004). Internet businesses such as Myspace “need to produce brilliant content” (Gauntlett, 2004) in order to obtain the greatest amount of users, as attention is considered scarce and a valuable resource. Lastly, an essential feature of commercial business in cyber space is connectedness (Rifkin, 2001, p.267). In a network economy long-term relationships are desired which is gained by “marketing cultural experiences” i.e. music experiences and communication.